Well, the idea would be to serve google.com/imgres a different version of the image than what people see when they actually visit the site directly. Yes, they would see that image in their browser when they go to Google image search.
As for losing rankings -- well, there's not much to lose at this point. Image search traffic has never been worth much, and now it's probably next to worthless. However, that's one reason to watch the numbers for a month or so before acting.